Stocks climbed, with the Standard & Poor’s 500 Index returning above its record closing level, after U.S. home sales increased and investors speculated central banks will continue to stimulate the economy.

European leaders are loosening the economic shackles once demanded by Germany as the recession and mounting unemployment in southern Europe shove aside the debt crisis as the euro area’s biggest headache.

The euro traded at the lowest level against the dollar in almost three months as Italy moved toward more elections and before data forecast to show the region’s economy shrank in the fourth quarter of 2012.

The euro fell the most in two weeks against the dollar as Italian and Spanish bonds slumped amid political turmoil in the euro-area’s third- and fourth-largest economies, damping demand for the shared currency.

U.S. stocks retreated for a fourth day, while Treasuries gained, as Senate Majority Leader Harry Reid said nothing is happening in budget talks and the nation appears to be headed toward the fiscal cliff.

The Japanese yen and U.S. dollar strengthened as investors sought perceived safety on concern U.S. deficit- reduction talks will fail to avert spending cuts and tax increases that threaten to push the economy into a recession.